LONDON Copper climbed to a 4-1/2 month high on Friday after the U.S. Federal Reserve launched a new round of aggressive stimulus that investors hoped would help bolster demand for industrial metals.
The rally in base metals echoed a rise in risk appetite across financial markets after the Fed said on Thursday it would pump $40 billion into the world's largest economy each month until it saw a sustained upturn in the weak jobs market.
European equities traded higher and the euro rose to a four-month high against a broadly weaker dollar. A weak dollar makes commodities priced in the U.S. unit cheaper for holders of other currencies.<MKTS/GLOB>
Three-month copper on the London Metal Exchange rose to $8,391 a tonne at 0928 GMT, up 4 percent from Thursday's close of $8,075 a tonne. The metal used in power and construction earlier hit its highest level since early May at $8,408 a tonne.
"It's clear that the markets have taken a very positive view on the Fed's action last night, and we have seen a strong move up today in markets," said Ross Strachan, economist at Capital Economics.
While traders and analysts expect a spike in base metal prices, they doubted if the rally could be sustained for long, as downstream copper demand in China remained sluggish.
"We would caution that we remain very skeptical of the longer-term implications of this. There is a likelihood that the price gains will not be sustained and prices will fall back again as the demand situation is still very poor."
Lead rose to its highest level in more than six months, zinc hit its highest in six months, aluminium hit a 5-1/2 month high, while tin and nickel both hit 4-1/2 month peaks.
Copper is on track for a weekly increase of more than 4 percent, which would bring its gains over two weeks to over 9 percent, the biggest two-week rise since November last year.
"Copper's next major resistance is 8497. There is increasing technical evidence to suggest that base metal prices are in the first part of a multi week/month move higher; there appears to be a way to go yet," Marex Spectron said in a note.
The spotlight turned again on the euro zone, as finance ministers will discuss on Friday if Spain should ask for financial support after the announcement of the European Central Bank's new bond-buying program brought Madrid's borrowing costs lower.
"We have seen markets take a relatively positive view on recent developments in the euro zone," Strachan said.
"But as we have seen in the past... the initial optimism has often dissipated very quickly and markets have slipped back as the reality of the underlying weakness in those economies comes to the fore."
Lead rose to its highest since late February at $2,255.75, from Thursday's close of $2,157.50, while zinc rose to its highest since mid March at $2,107.75 a tonne, from $2,036.
Aluminium hit its highest since late March at $2,161.50 a tonne from $2,102.
In China, aluminium profile manufacturers in Guangdong have reported a rise in orders this month, after a decline in order books in the past 3-4 months. Analysts and industry sources point see this as a sign of recovering demand.
Nickel climbed to its highest since early May at $17,476 from Thursday's close of $16,750, while tin rose to $21,500 from $20,350, also its highest since early May.
Indonesia's biggest tin miner PT Timah (TINS.JK) forecast production would be at least 38,000 tonnes this year, an official at the state-owned firm said on Friday, little-changed from the previous year.
Metal Prices at 0934 GMT Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T
Metal Last Change Pct Move End 2011 Ytd Pct
COMEX Cu 383.95 11.55 +3.10 344.75 11.37
LME Alum 2161.25 59.25 +2.82 2020.00 6.99
LME Cu 8392.75 317.75 +3.93 7600.00 10.43
LME Lead 2252.00 94.50 +4.38 2034.00 10.72
LME Nickel 17465.00 715.00 +4.27 18650.00 -6.35
LME Tin 21350.00 1000.00 +4.91 19200.00 11.20
LME Zinc 2105.25 69.25 +3.40 1845.00 14.11
SHFE Alu 15835.00 175.00 +1.12 15845.00 -0.06
SHFE Cu* 60470.00 2220.00 +3.81 55360.00 9.23
SHFE Zin 15760.00 485.00 +3.18 14795.00 6.52 ** Benchmark month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07
(Editing by William Hardy)